Juanita flew down to Florida to sail her newly purchased yacht back ho

QUESTION

Juanita flew down to Florida to sail her newly purchased yacht back home to Rhode Island. Before she left Florida, she stocked her boat with alcoholic beverages. What taxes did Juanita have to pay on this whole trip? Explain.

What will be an ideal response?

ANSWER

Answer: Juanita had to pay excise taxes on the airline tickets. She also had to pay excise taxes, called luxury taxes, on the yacht and excise taxes, called sin taxes, on the alcohol.
Explanation: Excise taxes are taxes based on the value of services or property other than real estate. Airline tickets, gasoline, and firearms require excise taxes. Excise taxes are also called sin taxes and, as such, are collected on such items as beer, liquor, and cigarettes. When they are applied to expensive boats, cars, and furs, they are called luxury taxes.